'House prices will keep rising'

Britain's biggest building society today defied doom-mongers by predicting house prices will rise next year.

Nationwide said it expects prices across Britain to edge up by two per cent in 2005, following the 13 per cent gains seen this year. London will also enjoy more increases, with prices expected to rise by three per cent compared with nine per cent this year.

But the outlook, it cautioned, is surrounded by "considerable uncertainties" and a property crash cannot be ruled out.

A major terror attack, a sharp rise in taxation after the general election or large-scale job losses could all trigger a house-price collapse, Nationwide said.

The market could also crash if large numbers of buy-to-let landlords sell at the same time, or if sellers slash prices to achieve quick sales.

Alex Bannister, Nationwide's group chief economist, said: "The doubling of prices over the last four to five years means that the housing market is now more highly valued and vulnerable to economic shocks or changes in buyer sentiment than in previous years.

"Whilst it is becoming increasingly unlikely, the recent slowdown could prove to be a false dawn - the risk being that any further strong price increases could precipitate a sharper correction in the future, or a longer period of stagnation," he added.

Unveiling its latest monthly price index, Nationwide said they bounced back in November, rising one per cent following October's 0.4 per cent fall. However, the year-on-year rate continued to slow from 15.3 to 15 per cent.

The price of a typical property in Britain now stands at ?153,439, just under ?900 below the July peak. "The trend in house price growth continues to slow and, importantly, so far the slowdown has been orderly," Mr Bannister said.

A growing number of experts warn the market is on the brink of collapse. Deutsche Bank last week predicted a 10-15-per-cent price slide, Capital Economics has pencilled in a 20-per-cent fall, while investment bank Durlacher says prices could slump up to 45 per cent.